Introduction to e-commerce

1. Introduction to e-commerce G53DDB Based in the slides corresponding to chapters 1-2 of Laurdon & Traver e- commerce book

2. Introduction to e-commerce - G53DDB Learning Objectives • Define e-commerce and describe how it differs from e-business • Identify the unique features of e-commerce technology and their business significance • Describe the major types of e-commerce • Understand the visions and forces behind the 1st E-Commerce era

3. Introduction to e-commerce - G53DDB Learning Objectives • Understand the successes and failures of the 1st E-Commerce • Identify several factors that will define the 2nd E-commerce era • Describe the major themes underlying the study of e-commerce • Identify the major academic disciplines contributing to e-commerce research

4. Introduction to e-commerce - G53DDB Learning Objectives • Identify the key components of e-commerce business models. • Describe the major B2C business models. • Describe the major B2B business models. • Recognize business models in other emerging areas of e-commerce. • Understand key business concepts and strategies applicable to e-commerce.

5. Introduction to e-commerce - G53DDB Amazon.com: Before and After • Most well-known e-commerce company • Conceived by Jeff Bezos in 1994 • Opened in July 1995 • Four compelling reasons to shop • Selection (1.1 million titles at its opening time) • Convenience (anytime, anywhere) • Price (high discounts on bestsellers) • Service (one-click shopping, automated order confirmation, tracking, and shipping information)

6. Introduction to e-commerce - G53DDB Revenues and Earnings Revenues Earnings 1996 $15.6 Million ($6.24 Million) 1997 $148 Million ($31 Million) 1998 $610 Million ($125 Million) 1999 $1.6 Billion ($720 Million) 2000 $2.7 Billion ($1.4 Billion) Amazon.com: Before and After Losses No profit until 2001: $5M 2008 $19.16 Billion $645 Million

7. Introduction to e-commerce - G53DDB E-commerce vs. E-business E-commerce involves • Digitally enabled commercial transactions between organizations and individuals. • Digitally enabled transactions include all transactions mediated by digital technology • Commercial transactions involve the exchange of value across organizational or individual boundaries in return for products or services

8. Introduction to e-commerce - G53DDB E-commerce vs. E-business E-business involves • Digital enablement of transactions and processes within a firm, involving information systems under the control of the firm • E-business does not involve commercial transactions across organizational boundaries where value is exchanged

9. Introduction to e-commerce - G53DDB The Difference Between E-commerce and E-Business

10. Introduction to e-commerce - G53DDB Seven Unique Features of E-commerce Technology and Their Business Significance

11. Introduction to e-commerce - G53DDB The Internet and the Evolution of Corporate Computing

12. Introduction to e-commerce - G53DDB Disciplines Concerned with E-Commerce

13. Introduction to e-commerce - G53DDB Major Types of E-Commerce

14. Introduction to e-commerce - G53DDB Major Types of E-Commerce • Market relationships • Business-to-Consumers (B2C) • Business-to-Business (B2B) • Consumer-to-Consumer (C2C) • Technology-based • Peer-to-Peer (P2P) • Mobile Commerce (M-commerce)

15. Introduction to e-commerce - G53DDB Business-to-Consumer E-commerce • Most commonly discussed type • Online businesses attempt to reach individual consumers

16. Introduction to e-commerce - G53DDB The Growth of B2C E-Commerce Europe is expected to reach €263M by 2011 (Forrester report, 2006)

17. Introduction to e-commerce - G53DDB Business-to-Business E-commerce • Businesses focus on sell to other businesses • Largest form of e-commerce • Primarily involved inter-business exchanges at first • Other models have developed • e-distributors • infomediaries • B2B service providers

18. Introduction to e-commerce - G53DDB The Growth of B2B E-Commerce

19. Introduction to e-commerce - G53DDB Consumer-to-Consumer E-commerce • Provide a way for consumers to sell to each other • Estimated $5 billion market • Consumer: • prepares the product for market • places the product for auction or sale • relies on market maker to provide catalog, search engine, and transaction clearing capabilities

20. Introduction to e-commerce - G53DDB Peer-to-Peer E-commerce • Enables Internet users to share files and computer resources • Napster (early example) • Skype (more modern and successful example)

21. Introduction to e-commerce - G53DDB Mobile E-commerce • Wireless digital devices enable transactions on the Web • Uses personal digital assistants (PDAs) to connect • Used most widely in Japan and Europe

22. Introduction to e-commerce - G53DDB Web Access Via Wireless Devices in the United States

23. Introduction to e-commerce - G53DDB Technology and E-Commerce in Perspective Although e-commerce has grown explosively, there is no guarantee it will continue to grow

24. Introduction to e-commerce - G53DDB E-Commerce I and II • E-Commerce I (1995-2000) • Explosive growth starting in 1995 • Widespread of Web to advertise products • Ended in 2000 when dot.com began to collapse • E-Commerce II (2001-2006) • Began in January 2001 • Reassessment of e-commerce companies

25. Introduction to e-commerce - G53DDB E-Commerce II 2001-2006 • Crash in stock market values of E-commerce I companies throughout 2000 is an end to E-commerce I • Led to a sobering reassessment of the prospects of e-commerce and the methods of achieving business success. • E-commerce II begins in 2001 and ends five year later -- the limit for making technology and business projections

26. Introduction to e-commerce - G53DDB E-Commerce II 2001-2006 • Reasons for the end of E-Commerce I • run-up in technology stocks due to enormous information technology capital expenditure of firms rebuilding their internal business systems to withstand Y2K • telecommunications industry had built excess capacity in high-speed fiber optic networks • 1999 e-commerce Christmas season provided less sales growth that anticipated and demonstrated e-commerce was not easy (eToys.com) • valuations of technology companies had risen so high supporters were questioning whether earnings could justify the prices of the shares.

27. Introduction to e-commerce - G53DDB E-Commerce I and E-Commerce II Compared

28. Introduction to e-commerce - G53DDB E-Commerce Business Models • Business model • a set of planned activities designed to result in a profit in a marketplace • E-commerce business model • a business model that aims to use and leverage the unique qualities of the Internet and the World Wide Web.

29. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model Page 58, Table 2.1

30. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Value Proposition • Defines how a company’s product or service fulfills the needs of customers. • Questions • Why will customers choose to do business with your firm instead of another company? • What will your firm provide that other firms do not and cannot?

31. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Revenue Model • Describes how the firm will earn revenue, produce profits, and produce a superior return on invested capital. • E-commerce revenue models include: • advertising model • subscription model • transaction fee model • sales model • affiliate model

32. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Revenue Model • Advertising revenue model • a company provides a forum for advertisements and receives fees from advertisers (Yahoo) • Subscription revenue model • a company offers it users content or services and charges a subscription fee for access to some or all of it offerings (Consumer Reports or Wall Street Journal)

33. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Revenue Model • Transaction fee revenue model • a company receives a fee for enabling or executing a transaction (eBay or E-Trade) • Sales revenue model • a company derives revenue by selling goods, information, or services (Amazon or DoubleClick) • Affiliate revenue model • a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales (MyPoints)

34. Introduction to e-commerce - G53DDB Five Primary Revenue Models Page 61, Table 2.2

35. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Market Opportunity • Market opportunity • refers to the company’s intended marketspace and the overall potential financial opportunities available to the firm in that market space • defined by the revenue potential in each of the market niches where you hope to compete • Marketspace • the area of actual or potential commercial value in which a company intends to operate

36. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Competitive Environment • Refers to the other companies operating in the same marketplace selling similar products • Influenced by: • how many competitors are active • how large are their operations • the market share of each competitor • how profitable these firms are • how they price their products

37. Introduction to e-commerce - G53DDB Marketspace and Market Opportunity in the Software Training Market Page 62, Figure 2.1 Your realistic market opportunity will focuss on one or a few market segments

38. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Competitive Advantage • Achieved by a firm when it can produce a superior product and/or bring the product to market at a lower price than most, or all, of its competitors • Achieved because a firm has been able to obtain differential access to the factors of production that are denied their competitors -- at least in the short term

39. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Competitive Advantage • Asymmetry • exists whenever one participant in a market has more resources than other participants • First mover advantage • a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service

40. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Competitive Advantage • Unfair competitive advantage • occurs when one firm develops an advantage based on a factor that other firms cannot purchase • Perfect Market • a market in which there are no competitive advantages or asymmetries because all firms have equal access to all the factors of production • Leverage • when a company uses its competitive advantage to achieve more advantage in surrounding markets

41. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Market Strategy • The plan you put together that details exactly how you intend to enter a new market and attract new customers • Best business concepts will fail if not properly marketed to potential customers

42. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Organizational Development • Describes how the company will organize the work that needs to be accomplished • Work is typically divided into functional departments • Move from generalists to specialists as the company grows

43. Introduction to e-commerce - G53DDB Eight Key Ingredients of a Business Model: Management Team • Employees of the company responsible for making the business model work • Strong management team gives instant credibility to outside investors • A strong management team may not be able to salvage a weak business model • Should be able to change the model and redefine the business as it becomes necessary

44. Introduction to e-commerce - G53DDB Major Business-to-Consumer (B2C) Business Models Page 67, Table 2.3

45. Introduction to e-commerce - G53DDB Major Business-to-Consumer (B2C) Business Models Page 68, Table 2.3 continued

46. Introduction to e-commerce - G53DDB Major Business-to-Consumer (B2C) Business Models • Portal • offers powerful search tools plus an integrated package of content and services • typically utilizes a combines subscription/advertising revenues/transaction fee model • may be general or specialize (vortal)

47. Introduction to e-commerce - G53DDB Major Business-to-Consumer (B2C) Business Models • E-tailer • online version of traditional retailer • includes • virtual merchants (online retail store only) • clicks and mortar e-tailers (online distribution channel for a company that also has physical stores) • catalog merchants (online version of direct mail catalog) • online malls (online version of mall) • Manufacturers selling directly over the Web

48. Introduction to e-commerce - G53DDB Major Business-to-Consumer (B2C) Business Models • Content Provider • information and entertainment companies that provide digital content over the Web • typically utilizes an advertising, subscription, or affiliate referral fee revenue model • Transaction Broker • processes online sales transactions • typically utilizes a transactions fee revenue model

49. Introduction to e-commerce - G53DDB Major Business-to-Consumer (B2C) Business Models • Market Creator • uses Internet technology to create markets that bring buyers and sellers together • typically utilizes a transaction fee revenue model • Service Provider • offers services online • Community Provider • provides an online community of like-minded individuals for networking and information sharing • revenue is generated by referral fee, advertising, and subscription

50. Introduction to e-commerce - G53DDB Insight on Technology:Goggle.com -- Searching for Profits • Web’s hottest search engine • Started in 1998 by two enterprising Stanford grad students • Uses outside criteria to validate that a search result is likely to be relevant • the more outside links there are to a particular page, the higher it jumps in Google’s ranking structure